Is India’s Silicon Valley Dying?

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Walk-in interviews for menial positions are seeing queues of people numbering in the hundreds, yet the worst is still to come. And that doesn’t even take into account rampant pollution. 

The city of Bangalore has proudly worn the sobriquet of India’s Silicon Valley for the last twenty years. The name was initially intended to promote the city as a beacon for India’s (at the time) burgeoning information technology (IT) industry, but it has now become a painful reminder of disappearing potential. Tales of dangerous pollution, growing unemployment, and damaged infrastructure have harmed the metropolis’ credibility, which begs the question: Is India’s Silicon Valley dying?

The growth of the city’s tech-dominated industry was jumpstarted by the development of an ‘electronic city’ on the outskirts of Bangalore proper. Today, what began as an experiment of the region’s Electronics Development Corporation has become the largest exporter of technology and software services in the nation’s $150 billion IT industry. Recently, however, a trend of job-cuts sweeping nearly all of the city’s major firms has raised concerns regarding the future of employment opportunities in the area.

The motives for the wave of negativity are threefold. Broad re-skilling efforts by industry leaders, combined with the advent of machine learning, have eliminated the need for most low-level skillsets. Moreover, rampant corruption and faltering infrastructure due to a lack of productive investment have reduced the incentive for companies to maintain a presence in the city. The final (and perhaps the most troublesome) issue is the rampant pollution that has decimated living standards. Chemical-infested water bodies have led to toxic foam and lakes catching fire, all of which have severely damaged the perception of Bangalore as an established IT hub.

The precarious prospects for employees in India’s Silicon Valley have their roots in the exponential improvement of deep learning technology. As a consequence of Bangalore’s image as a destination for skilled employment, there has been a surplus of people looking to enter the city’s IT sector.

Vocational training centers for these individuals are more concerned with the quantity rather than the quality of workers they can produce. The combination of these two factors has resulted in a supply of labor that is easily replaced with automated facilities. As the National Association of Software and Services Companies (NASSCOM) President put it: “The emphasis is shifting from scale, which was the primary goal earlier, to skills.”

The benefits of widespread automation to the companies are clear; for the past decade there has been an increasingly inverse relationship between the revenue of IT firms and the size of their workforce. Meanwhile, new entrants into the technology sector are finding that, as a consequence, opportunities are drying up. Walk-in interviews for menial positions are seeing queues of people numbering in the hundreds, yet the worst is still to come. Some estimates suggest that total lay-offs could exceed 150,000 in the coming year.

However, some say Bangalore’s troubles are only symptoms of a deeper problem. Large firms are shifting their bases away from the so-called Silicon Valley due to issues that make working in the city almost non-viable. The roads, water pipelines, and power supply facilities have been neglected for far too long, resulting in a catch-22 type situation: In order to raise funds to improve the local infrastructure and encourage companies, the state authorities have had to levy an excess tax on the area. However, this same tax is reducing margins and deterring start-ups while simultaneously discouraging existing businesses.

Furthermore, in the event that prospective IT companies surmount these physical barriers to entry, extensive red tape (such as approval delays and redundant business licenses) and deep rooted corruption (such as subtle requests for corporate “donations”) prevent new firms from establishing any sort of foothold in the city. As a result, it is no surprise that Indian multinational IT firms are utilising the United States’ reformed H1B visa regulation as an opportunity to replace domestic employees with Americans abroad.

While these issues contribute to the de-incentivizing of businesses, it is the rampant pollution that has been simultaneously eroding the morale of those employees that still remain. Secondary sector factories discharge untreated waste materials into nearby water bodies, resulting in bizarre instances where lakes have caught fire and streams have become choked by toxic froth.

The inaction by metropolitan authorities to correct these issues has resulted in an uproar amongst commuters, outraged by the conditions in which they are forced to live. Bangalore has been left with apprehensive businesses staffed by unhappy employees, both of which have one foot out the door (or in this case, city).

Ultimately, the Indian Silicon Valley’s growing ‘technological unemployment’ (a term popularized by John Maynard Keynes in 1933 that seems eerily prophetic today) is indicative of a basic issue: That the policy of encouraging economic growth in the city, with little regard for the external costs, is finally catching up with what was once the heart of India’s IT industry. With pollution and corruption having infected the city, it may now be too late to stop the rot.

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